That fundamental incoherence met its biggest test yet on Tuesday, when the European Union rejected Italy’s 2019 draft budget—an unprecedented move against a eurozone country—saying its deficit targets and wishful thinking about growth posed a serious threat to economic stability in Europe. Italy now has three weeks to submit a revised budget.[...]
The wrist slap from Europe—or was it a melodramatically slammed door?—is exactly what the Italian government may have wanted. The driving force in the government, Matteo Salvini—the bellicose interior minister, deputy prime minister, and head of the League party—came to power spoiling for a fight with Europe. His senior coalition partner (who comes across as junior), the Five Star Movement’s Luigi Di Maio, also got elected on promises of redefining Italy’s relationship to Europe. Together, they form a government that needs enemies in order to justify its existence. Europe, with its irritating, sovereignty-straining rules and austerity measures, is an enemy.[...]
The government’s game of chicken with Europe might backfire. “It might be a lose-lose proposition,” Fubini continued. “If they hold on, it can be very damaging to the economy,” he said of the rising borrowing rates. “But if they step back, there is an element of face loss. So I think it kind of has to get worse before they change tactics.”
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